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When posting a vendor bill that contains inventory items, QB Desktop sometimes posts a journal entry in the background that is not part of the bill. It almost looks like an adjustment of the cost based on standard costing... but I don't believe that's a functionality of QB Desktop. See adjustment below (the $2342 is part of the invoice, but the $43.69 is not on the invoice - a debit/credit is posted in the background)... any ideas where this comes from, and how I can get it to stop posting this!
Solved! Go to Solution.
If Shingles Supplies... is the item's inventory account and Materials is the COGS account, then this is happening because the inventory QOH dipped below zero as a result of a prior sale.
When that happens the COGS is estimated on the sale using the item cost at the time. If you then purchase the item again at a price that is different than that estimated cost, QB 'catches up' by adding an adjustment to COGS and inventory for the difference.
If Shingles Supplies... is the item's inventory account and Materials is the COGS account, then this is happening because the inventory QOH dipped below zero as a result of a prior sale.
When that happens the COGS is estimated on the sale using the item cost at the time. If you then purchase the item again at a price that is different than that estimated cost, QB 'catches up' by adding an adjustment to COGS and inventory for the difference.
Thank you so much! The mystery is solved... now I know to expect this when quantities dip below zero. Appreciate the help!
I purchased inventory and accidentally coded it as expense on the bill instead of coding to the item. This caused my inventory to go negative as I sold the items. The bill is dated prior to the sales invoices. If I correct the original bill from 2 years ago to show the purchase of the item (instead of expense), will QB automatically recalculate the subsequent sales transactions for the correct cost and change my last year's income statement? It's affecting many sales transactions that happened after the purchase bill. If I correct the bill to code to the item, it will also fix my negative inventory, but I'm afraid what it will do to my historical records.
Hi there, KrisD.
You can try to correct the bill and code it the item. Then, check if it fixes your inventory.
If not, you can adjust the quantity on hand to correct the inventory count. First, you need to create a separate account in your chart of accounts to track your adjustments.
Here's how:
Once done, here are the steps on how to adjust the inventory.
You can then take a look at your inventory status reports and make sure everything looks good.
Upon sharing this, It’s best to reach out to your accountant for advice before you adjust inventory value. If you don’t have an accountant, we can help find one near you.
I'm adding this article to to learn how to compute for the average cost and know which report will help with inventory management : Understand inventory assets and cost of goods sold tracking.
Don't hesitate to click the Reply button below if there's anything else you want to add. I'll be around to help you.
Thank you. Do you know if QB automatically recalculate the COGS on subsequent sales transactions for the correct cost and change my last year's income statement?
You're always welcome, @KrisD. I know what to do so QuickBooks automatically recalculates the Cost of Goods Sold.
You can enable Automatic Cost Updates by navigating to Preferences. Thus, when a transaction is created, the item cost is automatically adjusted. I'll walk you through how:
Additionally, you can set it up to automatically update the Cost amount of the item if it changes on a purchase.
However, if you're still seeing a high price listed, it implies that there isn't an established average price for the product. Purchases of the item, quantity, and total cost of that quantity contribute to the establishment of average cost. You can make a change to these things as a workaround. If you entered these things but did not use them in a transaction, you can remove the item and create it again and enter the appropriate amounts.
If everything is good, feel free to check out these handy articles to better understand how to handle inventory costs:
Keep in touch for more help about this topic or QuickBooks as a whole. It's our pleasure to assist. Have a nice day and take care!
@KrisD RE: If I correct the original bill from 2 years ago to show the purchase of the item (instead of expense), will QB automatically recalculate the subsequent sales transactions for the correct cost and change my last year's income statement?
Yes, when you change transactions in the past that use inventory items, the change will 'ripple forward' and COGS will recalculate on all the future transactions.
RE: Do you know if QB automatically recalculate the COGS on subsequent sales transactions for the correct cost and change my last year's income statement?
Yes, all future transactions' GOGS will update which will change your financial reports including the balance sheet and income statement.
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